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LEGO’s Approach to Customer-orientation

Everyone knows or has heard of the colorful bricks that can be combined to form all sorts of shapes, figures and creative constructions. The LEGO toy brick have been and still is a cornerstone in children’s education and play, and has been acclaimed “Toy of the Century” by Fortune Magazine in this millennium.

The LEGO Group which is a private held company based in Billund, Denmark, is still owned by the Kirk Kristiansen family, who established LEGO in 1932. Today LEGO has approx. 10.000 employees who provide toys and other teaching materials in more than 130 countries (LEGO website). The name LEGO comes from combining the two first letters in LEG GODT, in English “Play Well”, and also happens to mean “I put together” in Latin.

The LEGO group is a very innovative company, with a keen focus on following the pace of the market and developing tomorrow’s products. The rage of products has expanded to suit a greater variety of ages. Products such as Duplo, Lego, Lego Techno and LEGO MINDSTORMS, as well as LEGO’s recently developed online environments, where people can create avatars, interact, share information and get inspired. Platforms and forums for social medias increases as well, digital play experiences as well as a new concept called LEGO Design byME, allowing consumers to put together virtual Lego models on their computers with the option of buying them.

This article gives you a short insight into how LEGO focus on and interact with consumers to develop future product and services in line with consumer needs, preferences and interests. LEGO is an interesting example because LEGO.com currently ranks as the No. 1 family and children website, underlining there success in creating an online environment for their target groups.

The Creation and Development of Relationships

Creating a relationship today is a complex process because the approach is much more abstract and less straight forward then it has been. Managers need to change from having an Intention to a function of paying Attention to what is happening in the environment, online and culturally. It is based on the mobility to change awareness, in the case of LEGO to change awareness according to children’s interests through LEGO.com, particular games, development of ideas, etc.

The model below Illustrate the process of relationships in a Customer-oriented company, divided into the Analysis- and Action part, and will be used in the following to uncover LEGO’s approch. Trust remains an important and central element throughout the 4 steps.

Identify

LEGO is complex in the sense that it has BtoB sales and BtoC sales, which makes identification a bit more complex. Initially LEGO has direct contact to consumers through LEGO club, own sales channels, collaboration channels, LEGOLAND, etc. but has as target to increase direct consumer contact. Furthermore LEGO has a systematic collaboration with partner customers (BtoB), to ensure quality, get feedback on marketing efforts, overall satisfaction, etc. An annual “Health Check” also helps LEGO determine the overall benefit of the relationship to external sale channels. But the collaboration does not supply LEGO with specific consumer data.

LEGO has recently invested in an integrated SAP system to keep track of consumers. Consumers are divided into 4 groups, mentioned in next step (pyramid structure), where different promotions, discounts and offers apply. Following a list of some of the channels LEGO apply to identify customers and consumers:

“LEGO Universe is the first massively-multiplayer online game from the LEGO Group, enabling imaginative digital building and play with friends and other players in a safe online environment… opportunity to create and share their own worlds and stories in a new, virtual play space.”

(See LEGO Universe Trailer)

Differentiate

LEGO have already made huge organizational change to gain better understanding of consumers, and are doing an effort to do it even better. The SAP system makes LEGO able to specify offers for certain target groups which in turn will drive loyalty towards LEGO. The four groups are:

–Lead Users; Children and adults who is heavily engaged in LEGO (top of pyramid)

–One-to-One layer; Group which LEGO keeps an ongoing dialog

–The Community Layer; Users of online games, communities, etc.

–Active household layer; Have bought LEGO sometime in the past. (bottom of pyramid)

SAP has several features that LEGO benefit from such as:

“Loyalty management software from SAP, integrated with The LEGO Group’s SAP ERP and SAP CRM platform, helps ensure rewards offered to each group are synchronized with what they value and their level of engagement with the brand.”

Interact

With LEGO’s SAP system and overall strategy, they are able to target the different segments, with offers in line with the relationship. LEGO has centralized departments having direct consumer contact, making individual interaction more structured and targeted.

LEGO keep contact with consumers based on their specific traits within the SAP layer system, mentioned before . Following are some of the other channels of interaction (in brackets interaction specified):

LEGO is very much aware of protecting children’s information, and the information they are exposed to through LEGO channels, which is clearly stated within LEGO’s Parent Website. This in line limits LEGO to a certain extent, since trust and safety is crucial:

“Those Safety Guidelines strictly prohibit the posting of information that could personally identify a child, such as their photo, real name, e-mail address, phone number or physical location.”

(LEGO Parent Website 2012)

Customize

Below an example of how LEGO groups interaction works:

“…customer experience consultant Steve Curtin discovered when his young sons attended a Star Wars-themed birthday party at their local store. All of the party guests were treated to goodie bags containing a copy of the LEGO Club Magazine, a membership card, a store coupon, a “Builder’s License” and a tips-and-tricks card.”

With a VIP system based on SAP, consumers can get custom made proposals, offerings and news when they log into LEGO’s website. It is a way of establishing the customers/consumers loyalty (Lauren Gibbons 2011).

As a LEGO club member you get several advantages, such as events in LEGO Brand Store, LEGOLAND and other of LEGO’s venues, as well as targeted information and promotion codes through Newsletters and LEGO club Magazine, primarily based on age.

“LEGO is particularly successful at creating these types of tailored cross-channel interactions…”

LEGO actively use coupons, card, different memberships, Licenses, etc. as an extra tool to generate target user experiences, as an addition to the CRM system. A clear case of customization is LEGO Design byME, which allow consumers to design their own solution, not only does it satisfy consumers, but supply LEGO with valuable information about consumer preferences. In a report about User-Generated content (Berg-Jensen 2012) the implication of analyzing and filtering such information to design future product is discussed:

“…the study shows that it is indeed possible to leverage data generated in Web 2.0 settings for the filtering and selection of promising user-generated content.”

Success and Barriers to Success

“Some observers speculated that the Lego Group had overdiversified its product line with moves into such areas as apparel and theme parks. Others blamed the exploding popularity of video games or pressure from low-cost producers in China.”

High degree of diversification make CRM way more complicated then it could be with fewer products, and have caused a struggle to LEGO earlier. But the changes LEGO have undergone during the last couple of years, by optimizing supply chains and decreasing number of logistic providers, have allowed LEGO to work closer together with external distributers, to target customers differentiated needs and behaviors better.

A focus on online environments, social media, games, development environments, blogs, etc. have proven to be very successful, and LEGO have experienced health growth during and after the implementation. But if LEGO can improve customer/consumer knowledge and costumer/consumer identification better through external distribution channels, CRM could be improved even more. This is definitely one of the weakest points in LEGO’s CRM strategy at the moment.

CRM Advice

No doubt that LEGO has turned the company around during the last couple of years on many aspects, but just to get an overview of future challenges related to LEGO’s CRM, the following list wrap-up some advices based on this paper:

Do not diversify products further, if it affects CRM negatively.

Increase Trust, credibility and intimacy through expanded dialog and contact to parents and customers (there is room of improvement considering the importance).

Develop a system to handle identification and interaction through external distribution channels.

Since Trust is a key issue in relationship, LEGO should pay extra attention when expanding online environment for children, concerning the children’s identity and protection.

Keep focus on developing internet/online opportunities, since this could have great impact in the future, and supply valuable consumer and customers data for the development of future products and services.

Never forget the core product, The Lego bricks, when expanding business (ex. Online environment), since this is the heart and soul of the company.

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